Building positive financial habits could help you feel more in control of your money and set you on a path to achieve your goals.
In the 1993 film, Groundhog Day, Bill Murray finds himself trapped in a time loop that forces him to relive 2 February repeatedly. He finally escapes by changing himself for the better.
If you’ve fallen into financial habits that aren’t serving you, take inspiration from Groundhog Day and escape this trap by replacing them with new habits that you’ll definitely want to repeat.
Read on to discover six such habits that could help you achieve your goals.
1. Pay yourself first
Treating savings as an essential bill is a clever way to build a savings habit.
“Paying yourself first” means treating your contributions to your pension, savings, and investments as a regular outgoing, and planning to save a percentage of your earnings each month as soon as you receive them.
Automating your savings is an easy way to achieve this. Each month you can automatically transfer a specified amount to your savings, pension, and investment accounts.
Rather than saving whatever you have left at the end of the month, plan your spending around your savings. Taking this approach could help you achieve your financial goals while also accumulating an emergency fund to cover unexpected events.
2. Talk openly about your finances with family
As important as money might be to your life, it’s often a taboo subject in many families. And yet, breaking down this barrier could benefit both you and your loved ones.
By talking openly about finances with your family you could help your children and grandchildren learn how to manage money effectively while also protecting your financial future. For example, you could include your loved ones in your estate plans to smooth the transfer of wealth between generations.
Communicating with your partner about money could also allow you to plan financially as a couple, which may be a more tax-efficient way to save and invest.
For example, both you and your partner have an annual ISA allowance of £20,000 in the 2023/24 tax year. This means that as a couple, you could save £40,000 tax-efficiently – and neither of you will pay Income Tax or Capital Gains Tax when you draw money out of your ISA.
Additionally, getting into the habit of talking about finances with your family could allow you to address any changes in circumstances as they arise.
3. Keep on top of debt
With interest rates expected to stay higher for longer, the cost of borrowing remains at a 15-year high.
If you only pay the minimum amount due each month on your unsecured debt, your balance could grow exponentially due to the powerful impact of compounding. This means that you’re charged interest on both the principal balance and any interest that has accrued previously.
So, repeating the habit of paying off your credit card in full each month could help you reduce the amount you pay in interest. Or, if you have multiple debts, paying off high-interest loans first might help you keep on top of your debt.
Alternatively, consolidating your debts into a single loan might make your debt more manageable. However, this may not always be the most affordable way to clear your debts, so it’s worth seeking financial advice first.
4. Diversify your investments and focus on long-term goals
Periods of market volatility may feel disconcerting, especially if you’re new to investing. However, it’s important to remember that fluctuations in the market are inevitable.
Staying focused on your long-term financial goals and avoiding obsessively checking your investments could help you stay positive if the value of your portfolio drops in the short term.
And diversifying across different asset classes, across different sectors, and in different parts of the world, could spread your exposure to risk and protect your portfolio from the potentially damaging impact of market volatility.
Not worrying about the value of your portfolio on a daily basis, and making sure you diversify your investments – something we can help you with – are great habits to repeat again and again.
5. Review your level of protection
Having adequate protection in place to ensure that your loved ones will be supported if you’re no longer able to provide for them could give you valuable peace of mind.
Your protection needs will depend on your circumstances – such as who you want to protect and for how long – and these priorities may change over time.
For example, if you become the sole breadwinner in the family, you might feel more concerned about losing your income or being unable to work.
So, regularly reviewing your level of protection – perhaps every Groundhog Day! – will allow you to check that your cover is still sufficient to meet your needs.
6. Meet with your financial planner regularly
Getting into the habit of regularly meeting with your financial planner could improve your emotional wellbeing as well as increase your confidence in managing money.
According to research published by insurer Royal London, 68% of customers who received regular professional financial advice felt “in control of their finances” compared to 53% of those who had never consulted an adviser.
A financial planner can help you set personalised goals and create plans to achieve them. And, if your circumstances or objectives change, they can help you adjust your plan to keep you on track.
Get in touch
If you’d like to learn more about how to build positive financial habits that will help you achieve your goals, we’d love to hear from you.
Please email us at email@example.com or call 0345 505 3500.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.